-Canadian aid performance will decline between 2012 and 2014 if the Government maintains the freeze on the International Assistance Envelope (IAE) at $5 billion. The June 2011 Budget continued the freeze on the IAE at $5 billion for the next three years (see a description of the IAE in Annex One). CCIC estimates as a result that ODA will remain at approximately $5.2 billion between 2012 and 2014. This includes non-budgetary additions to the IAE, but assumes no additional special one-off allocations during these years. Under this scenario, while ODA remains constant, Canada’s aid performance as measured against Canada’s Gross National Income (GNI) will decline from an estimated 0.34% in 2010 to 0.29% in 2012, and 0.27% in 2014.
-In practice, and despite the freeze on the IAE, Canadian aid allocations in FY 2010/11 and 2011/12 show an actual increase relative to FY2009/10. CCIC estimates that in FY2011/12, CIDA will have in fact distributed closer to $5.66 billion, equivalent to 0.33% of GNI, a modest increase from $5.54 billion in FY2010/11. These higher figures (relative to the IAE estimate for 2012-14 calculated above) are in large-part due to supplementary estimates of $452.6 Million in FY2010/11 and $416.1 million in FY2011/12 (allocated to climate change, food aid, the humanitarian disaster in East Africa and education). As a result of these special one-off allocations, Canada actually increased its allocations in both FY2010/11 (although just short of the promised 8% increase) and in FY2011/12 (by almost 6% above the freeze).
-Under a possible scenario in which the government decreases the IAE by 5% in the 2012/13 Budget, Canadians would see annual ODA allocations drop to $4.99 billion in FY2012/13, and perhaps subsequent years. A 5% cut in aid allocations from the IAE would see ODA allocations tumble by $670 million or 12% in FY2012/13 relative to actual expenditures in FY2011/12. Excluding the 2012/13 special allocations, and relative to the flat-lining of the aid budget at $5.24 billion, the drop would still be significant at $250 million. This is equivalent to cutting CIDA’s entire education budget ($250 million) or its support for the Global Fund to fight HIV AIDS, Tuberculosis and Malaria ($180 million) combined with its support for the World Food Programme ($70 million) or for UNICEF ($70 million). To give some further context, alternatively CIDA’s budget could be maintained this year if Defence bought one less of the 65 F-35 jets.
-The immediate impact on aid flows of a decline to the IAE will not be immediately known. If there is an announced decrease to the IAE, it is unlikely that the Federal Government will provide any specific details in Budget 2012 in terms of where these cuts will be made – that is, whether the cuts are to the transfer budget (for programs in the field), or to CIDA’s operational budget or both. These details will make themselves evident only when CIDA’s Part III Report on Plans and Priorities (Estimates) are released in early April. In a scenario where the cuts are entirely to the operational budget, CIDA will be able to maintain its transfer budget. In a scenario in which cuts are made to the operational budget, but the IAE remains frozen at $5 billion, CIDA may actually see its transfer budget increase.
-A 5% to 10% cut just to CIDA’s operational budget will have disproportionate impacts on the Agency. In terms of operational budget, CIDA, like all government agencies, has had to prepare 5 to 10 percent budget cut scenarios – this is on top of the cuts that many agencies have already undergone in recent months and years. On the surface, standard cuts across government departments seem fair. But in reality, they are likely to have a disproportionate impact on smaller government agencies, like CIDA. In the short term, staff support for programmes will be lost. But dig deeper and these cuts will also undermine the minimal institutional capacity and knowledge that CIDA requires to ensure that Canada continues to deliver quality programs overseas.
-Climate change financing in FY2012/13 must continue to be additional, and must better balance adaptation and mitigation. Based on the supplementary estimates provided for FY2011/12, it would appear that $373.4 of $381.4 million the government identified for climate change in these estimates were new allocations. Assuming the government counts all of this fast-track financing as ODA (which it did in 2010/11), it can be considered additional to the ODA allocation in the original 2011/12 federal budget. This is a positive, and the government should maintain this position in Budget 2012.
To ensure future aid predictability, the Government should also announce as part of Budget 2012 a plan and timetable of climate financing beyond the initial “fast track” climate financing it has provided in FY2010/11 and FY2011/12. Furthermore, a plan to meet Canada’s fair share of climate financing, both in the 2010-2012 “fast start” period and beyond, must not only meet financial targets, but must also balance mitigation and adaptation spending, and ensure financing is directed towards mechanisms that give priority to addressing impacts on poor and vulnerable populations.
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